According to data from Moneyfacts, the three sub-one per cent deals were from Furness Building Society and were two-year discounted variable rates. Rates start from 0.79 per cent.
The number of sub-one per cent deals steadily grew last year, going from one in May last year to a high of 150 in October. After that, deals nearly halved to 59 in November and then fell to 22 in January.
Brokers said that inflation continues to rise and with interest rates expected to continue increasing that sub-one per cent deals would become rarer.
David Hollingworth, associate director for communications at L&C Mortgages, said: “The turnaround in rates has been extremely sharp and whilst summer last year brought round after round of cheaper and often record-breaking lows, rising inflation has put paid to that with a reversal of that trend.
“The sub-one per cent deals still on offer are variable rates when last year gave borrowers the chance to fix their rate in below one per cent, not only for two years but also over the medium term with a good range of five-year fixed rates dipping beneath one per cent.”
He added that fixed rates are the “dominant choice” for borrowers and are likely to remain so as households face rising living costs and fixed rates offer more “safety” than a variable rate to secure a lower price.
Hollingworth said: “Although the sub-one per cent rates look set to disappear altogether it’s important to remember that fixed rates below two per cent are still exceptionally low and so borrowers still have the chance to not only make good savings versus a Standard Variable Rate (SVR) but also to protect against the uncertain outlook at attractive rates.”
Gareth Lowman, SPF Private Clients’ property finance director, added that he did not foresee any sub-one per cent deals “returning for a long time, if at all”.
He said: “Swaps have risen significantly and even those lenders with deep pockets are unlikely to [release sub-one per cent deals] in order to preserve their service standards.”
He added that borrowers should be mindful that products are linked to a lender’s SVR rather than the base rate, so there is less transparency.
Lowman added that if lenders increased the SVR to move in line with the base rate, payments could rise.
“How far base rises and how quickly it does so can be considered a gamble. However, given their attractive pricing and the pricing differential compared to the fixed alternatives, those who can afford the gamble may do so and I wouldn’t expect them to be around for long,” he said.
He added that other building societies could follow with cheaper discounts but as base rates and SVRs continue to rise then the likelihood of further sub-one per cent deals fell.
